BTS agency HYBE shares rally as market backs its K-pop deal (updated)

SM Entertainment Co

14/02/2023 06:52

(Recasts, updates shares)
    By Hyunsu Yim
       SEOUL, Feb 14 (Reuters) - BTS agency HYBE  352820.KS 
saw shares rally 6.6% on Tuesday as the market bet it would
emerge as the winner from a major restructuring of South Korea's
K-pop industry, boosting its earnings and giving it even greater
market dominance.
    HYBE announced plans on Friday to acquire up to a 39.8%
stake in SM Entertainment  041510.KQ . That includes a 14.8%
stake from founder Lee Soo-man that has been already agreed, as
well as 25% through a tender offer, just days after rival Kakao
agreed to buy a 9.05% stake in SM.
    HYBE's share price gain far outpaced the wider market's
0.57% rise. SM shares also rose by 0.95% after hitting a high of
119,000 won, nearing the tender offer price of 120,000 won as
part of HYBE's deal to take over SM's management rights.  
    As shares rallied, SM became the ninth-largest company
listed on the smaller Kosdaq  .KQ11  index on Tuesday, putting
its market capitalisation at 2.79 trillion won  ($2.20 billion)
and outpacing rival K-pop agency JYP Entertainment  035900.KQ .
    HYBE and SM are two of the largest K-pop agencies, and
analysts said the SM takeover would further solidify HYBE's
position as the industry leader.
    SM, founded in 1995, was at the forefront of taking K-pop
global with acts like Girls' Generation and EXO.
    Jina Ahn, an analyst at eBest Investment & Securities, said
the deal would give HYBE a line-up of K-pop artists from
multiple generations as well as expanding its range of foreign
artists.
    "It will dispel the concerns over the slowdown of profit
growth caused by BTS' hiatus," Ahn said in a note.
    Top-selling boy band BTS plans to reunite in 2025 after
pursuing individual projects.
    SM and HYPE should be able to achieve cost savings and a
larger scale from combining their platform, solution and music
label businesses, according to Lee Ki-hoon, an analyst at Hana
Financial Investment Co.
    In a town hall meeting with staff on Monday, HYBE CEO Park
Ji-won said he respected SM's legacy and promised to ensure the
label's independence, Yonhap reported on Tuesday. HYBE declined
to comment.
($1 = 1,268.5700 won)
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 (Reporting by Hyunsu Yim; Editing by Jamie Freed)
 ((Hyunsu.Yim@thomsonreuters.com;))